Antares Pharma, Inc.

Welcome to the Ontaris Pharma Third Quarter 2021 Financial and Operating Results Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If you would like to ask a question, please press star 1. Again, that is star 1 if you would like to ask a question. I will now hand the conference call over to Tram Bui, Antares Vice President of Corporate Communications and Investor Relations.

Thank you, Operator, and good morning, everyone. Earlier today, we announced our third quarter 2021 financial results and operating achievements. A copy of the press release and slide presentation for today's conference call are available in the Investor Relations section of the Antares Pharma corporate website. Before we begin, I'd like to remind listeners that some of the statements made during this conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include those related to our future financial and operating results, including our expectations regarding the impact of the ongoing COVID-19 pandemic on our overall business, operating results and financial condition, our ability to achieve the updated 2021 revenue guidance, future revenue growth, prescription volumes, product launches and market share for our products and our partner products, FDA actions and potential regulatory approval for our and our partner products, timing and results of ongoing and future development programs, and clinical trials for our products and our partner products and future business development efforts. These board-looking statements are subject to certain risks and uncertainties, and actual results could differ materially. They are identified and described in today's press release in the accompanying slide presentation on slide two and in the company's filings with the SEC on form 10-K and as updated in Antares' recent periodic filings on form 10-Q and form 8-K. Antares is providing this information as of the date of today's conference call and does not undertake any obligation to update any forward-looking statements contained in this conference call as a result of new information, future events, or circumstances after the date hereof, except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements. Joining me on the call today are Bob Apples, President and Chief Executive Officer, Fred Powell, Executive Vice President and Chief Financial Officer, Dr. Peter Richardson, Executive Vice President, Research and Development and Chief Medical Officer, and Joe Renda, Senior Vice President of Commercial. Let's review the agenda for today's call on slide three. Bob will begin with a review of our overall business, including the recent licensing agreement for Tolando, and then hand the call over to Joe to provide an update on our commercial achievements and strategy for our proprietary portfolio. Dr. Peter Richardson will then discuss our R&D initiatives, before handing the call back to Bob to provide a review of our Alliance business. Fred will then go through the detailed financials, and Bob will conclude with closing comments before opening the line for your questions. Please turn to slide four, and I will hand the call over to Bob Apple. Bob?

Thanks, Charm, and good morning, everyone. And thank you for your interest in our third quarter results and operations update. As we look at the third quarter and year-to-date results, we are very pleased to report another record period of growth. We believe the operational and financial advancements we have achieved across our business is reflective of the strength of our organization and highlights the multiple and sustainable opportunities that remain in front of us. Our third quarter and nine-month revenue increased 20% and 28% year-over-year to more than $48 and $135 million. EBITDA in the third quarter increased to $11 million and approximately $29 million in a nine-month period. And then income before taxes increased 45% in Q3, to $7.2 million, and over 250% to $17.2 million in a nine-month period. We achieved these impressive results through an extremely challenging time with the emergence of the Delta variant, affecting patient visits and physician access, as well as putting tremendous pressure on supply chain from our manufacturers and suppliers. Even with the strong headwinds in play, Zyestad and Tevis Generic EpiPen continue to be the primary contributors to our growth again this quarter. We also expect the recent licensing of Talando and the development of ATRS 1902 for Adrenal Crisis Rescue will further enhance our proprietary portfolio and be future drivers of our overall growth. Furthermore, we anticipate these internal achievements, coupled with the potential opportunities that remain with our alliance business, will create a foundation to continue to grow our business. Let me first start with the signing of the U.S. license for Talando in October, which is a twice-daily oral treatment for testosterone replacement therapy, tentatively approved by the FDA. We have committed to broadening our commercial proprietary portfolio, and the opportunity to complement our existing therapeutic footprint with another testosterone offering to physicians and patients significantly enhances our near-term growth opportunities. Within the backdrop of a large and growing TRT market, we have a sales force that continues to prove their success with Zyvested that we expect can seamlessly leverage their physician relationships to drive adoption of an oral dosage form of testosterone. Based on our discussions with physicians and patients, it is our understanding that there is a preference for more than one therapy option, and our growing commitment to TRT will support our market share gains and revenue growth in this market. Overall, we've remained fiscally diligent with prospecting for corporate development and believe the financial terms of the license agreement with an upfront payment of $11 million represents an attractive opportunity with a compelling story and natural fit. We expect to launch this complimentary product in the second quarter of 2022 upon FDA approval based on the expiration of an exclusivity period of a competing product. From a market standpoint, We believe Talando has several positive product attributes, such as one dose of strength and less restrictive dosing instructions, among others, that could set it apart from the other oral products. We also expect to conduct further diligence and assess the development opportunity for Talando XR, a potential once-daily oral treatment for testosterone replacement therapy, which we believe could represent a significant benefit for patients and physicians. Let me now turn the call over to Joe to provide an overview of our commercial achievements and provide more detail on our commercial strategy for an expanded proprietary portfolio.

Joe? Thanks, Bob, and good morning, everybody. I really appreciate the opportunity to join today's call. Throughout the year, our commercial organization has continued to perform quite well with our entire portfolio of products, including Zyastad, Nocturna, and Otrexa. And this was despite the challenges we faced with the Delta variant that created physician access barriers and fluctuating patient volumes And this was particularly burdensome in this last quarter. But with that said, we were still able to demonstrate 32% year-over-year growth in our proprietary portfolio in the quarter. And we believe we will have an even more compelling bag to offer both physicians and patients with the anticipated launch of Talando for next year. Let me start by sharing a little bit about our flagship proprietary product, Zysted, which continues to be one of the main drivers of growth. As you can see in slide five, In the third quarter, Zyestad total prescriptions increased 40% year-over-year and almost 50% year-to-date. And this is despite the slightly more limited physician access and decrease in patient visits that I just mentioned. We had some of our highest weekly performances with Zyestad in both the months of September and October. And just to give you some perspective, and this is according to the IQVIA data, urology office visits are still down more than 30% from the pre-pandemic levels. Yet despite that and with that said, we had the highest weekly performance of Zysted since launch of approximately 5,200 TRXs just last week. Although we saw a 60-40 in-person versus virtual detailing mix in the third quarter, now with the Delta variant subsiding, we're starting to see physician access and patient volumes continue to improve throughout the month of October, and we expect it to continue as the remainder of the year unfolds. As I said, remains the top priority for our field force as they focus on driving deeper penetration within the existing prescriber base of nearly 10,000 physicians who are top decile writers. We're pleased with the 50-50 split between both new patient starts and switches from the IM injection, particularly as those new patient starts may have been slightly stunted in the earlier part of the third quarter due to the variant. And our hybrid selling model really continues to work well as we flex between the in-person and virtual calls And that's really based on whatever the requirements are of the physician's offices that we call on, as well as those respective markets. As we continue to successfully position Viastead as a best-in-class, painless sub-Q injection, we believe physicians and patients really have a preference for the different treatment options. And that leads me to the opportunity we'll talk now about, which is Talando in slide six. We have consistently noted that the TRT market really remains compelling from a size and growth perspective. with almost 8 million total prescriptions, injections still represent the majority of approximately 75% of the shares in that market, but the gels still hold a substantial share of about 25%, which is roughly 1.8 million prescriptions, and that's of the overall TOT market. Given those market dynamics, we think an offering of both an injectable and oral therapy are highly synergistic and will only enhance our overall growth trajectory. We expect to market Tolando and Zysted together complementary as options for patients and physicians. And while Zysted offers a convenient once-weekly painless injection option with a compelling clinical profile, we believe that patients who may prefer an oral treatment and may not choose an injection as their first option. So as I stated before, there are approximately 1.8 million prescriptions for gels which may not be optimal for patients given the challenges that the daily application represents, as well as the risk of transference. So the opportunity to have both Zyestad and Talando in the Salesforce's bag next year gives our Salesforce the ability to have both options for physicians and their patients, and it really allows them to choose what best option and treatment is best for their needs. Recently, we attended the National SMSNA Conference, which is an annual professional medical congress focused on sexual health and hormone replacement. And we had several medical key opinion leaders there that were familiar with Talando's clinical profile. And they expressed, in their opinion, that Talando has some distinct clinical advantages over the oral that's on the market today, such as no need for a complex titration schedule and a convenient BID dosing with a standard meal. These were some of the main attributes which also attracted us to the product, and we'll use the next several months to put together a comprehensive launch strategy which will be inclusive of market research and message testing, and we're going to build a very strong launch plan for next year. As we plan for the final FDA approval based on the expiration of Gintenzo's exclusivity period, which is March 27th of next year, we also expect to expand the size of our sales force. leverage their existing relationships with healthcare providers and ensure we have the appropriate market access for Tolando, which we anticipate will be similar to that, as I said, which garners nearly 75% of covered commercial lives nationally. We recently expanded our field force from 79 representatives, and we expect to have about 90 on board by the end of this year, and that's to support our current portfolio. But with the addition of Tolando, We plan on increasing our sales footprint by an additional 20%, which will enable us to reach more prescribers in new markets. And ultimately, these additional territories will be able to cover about 95% of the total TRT prescriptions in the market. And we believe our current sales force will be able to successfully leverage their relationships with their urologists, endocrinologists, and primary care physicians, as well as their clinical acumen to drive adoption of Talando. We will continue to support their efforts by enhancing the strength and size of our commercial organization to grow both ZyCED and Nocturna in tandem with preparing for the launch of Tolando in the second quarter of next year. In the meantime, while ZyCED remains the primary detailing focus for all of our representatives, we're also dedicated to the opportunity to continue to grow Nocturna. Nocturna remains a priority within our sales force, and we continue to support their marketing efforts with branded consumer and healthcare provider digital campaigns, sales and marketing tools, as well as physician education. And I wanted to take this opportunity to say a congratulations to the marketing team here at Antares, as they were recognized recently as a top 25 marketing team by the DTC Perspectives for their work on the digital campaigns for both Zysted and Nocturna. The digital strategy for healthcare providers remains a paramount part of our plan as we believe that physician education is a critical component for the success of Nocturna. In the third quarter, we also took advantage of the slight shift in in-person customer calls and were able to garner significant interest in our peer-to-peer educational speaker programs for Nocturna, which you can see is highlighted on slide seven. We have hosted more than 35 programs across the country. We've educated almost 200 healthcare providers so far just this year, and we have several other programs lined up between now and the end of the year. We really believe that Nocturna will require a normal sales cycle of a new brand launch, which is at least six in-person physician interactions, really in order to affect prescribing habits. But the feedback so far we continue to receive on the programs we believe will also accelerate the future growth of Nocturna. I'll wrap up here by saying as we look to finish out the year, our expectations remain high for Zyastad as the feedback from our customers and patients remains extremely positive. We believe Nocturna can be a future contributor to our revenue growth as we help physicians better identify these patient types in their practice. The energy and the spirit that's been shown by our commercial organization at our recent in-person regional sales meetings really provided greater evidence that this team is excited to increase script growth across our products both and also leverage their physician relationships, particularly now as we'll have an oral testosterone product in Tolando that will potentially be added to their bag next year. Overall, everyone is invigorated with the tremendous opportunities we still have in front of us to support the growth of our proprietary portfolio. And with that, I'm going to hand the call over now to Dr. Peter Richardson. Peter.

Thank you, Joe. Good morning, everyone. Throughout the year, we've continued to advance our clinical development initiatives, which brings us to slide eight, where we will begin our discussion with ATRS 1902. We were pleased the FDA accepted R&D for 1902. And subsequently, this has allowed us to initiate a phase one study on time as planned. The development program for 1902 is designed to support our proposed indication that the treatment of acute adrenal insufficiency, known as adrenal crisis, in both adults and adolescents, using our new proprietary auto-injector platform, now formally known as DIFE, to deliver our stable liquid formulation of hydrocortisone. In the third quarter, we announced the first subjects for the Phase I study were dosed, and I'm pleased to report that the first cohorts have completed the study as planned, and samples will now be analysed. This crossover study in 32 healthy adults is designed to establish the PK profile of ATRS1902 compared to Solid Cortev, evaluating the safety, tolerability, and pharmacogenetics of our stable liquid formulation of hydrocortisone when given by intramuscular injection. This study demonstrates our ongoing commitment to help and serve patients who need acute rescue therapies, as shown on slide 9. Our development team created a new device platform specific to the needs of these patients who suffer with adrenal crisis. Our goal is to provide a simple, convenient injection versus the current multi-step standard of care, which is both cumbersome and can be challenging for patients and their caregivers, particularly in a time of crisis. We anticipate following this study next year with a second human factor study and a definitive bioequivalence study in the final autoinjector. These activities should keep us on track with our timeline for the anticipated 505B2 NDA filing with the FDA towards the end of next year. Moving to our second internal development program, we've chosen to conduct additional preclinical studies for ATRS 1901. our uro-oncology formulation designed to be delivered weekly using an auto-injector. These will occur early next year and should then allow us to file our initial IMB with the FDA shortly thereafter. We're currently reviewing data to confirm that the selected formulation will deliver the target levels of active drug and be satisfactorily tolerated. Overall, we remain committed to progressing all of our development programs. and we look forward to making additions to our pipeline in 2022, utilizing our formulation and auto-injector capabilities with an emphasis on rescue therapies. And with that, I'll now hand the call back over to Bob. Thanks, Peter.

Our commitment to the growth and development of our proprietary portfolio mirrors the opportunities we envision for our partner business, and I'll start with Tevis Generic EpiPen. In the third quarter, Teva's generic EpiPen outperformed with a pre-pandemic or normal back-to-school season, as total prescriptions increased 91% year-over-year, and they commanded a 58% market share of the EpiPen market, as illustrated on slide 10. Our continued success with this partner product was the primary driver to our 70% quarterly increase in royalty revenue. We expect Teva to maintain the relative market share as we focus on maintaining a consistent supply of auto-injectors, despite labor issues with our manufacturers, that was particularly challenging this past year due to the pandemic. Furthermore, we believe our additional opportunities with Teva for generic for Teo and Bayeta will bear significant value in the future as they continue on their path for FDA approval. As Teva just noted on their third quarter call last week, they are fully committed to being leaders worldwide in generics, and as they await a a weight of regulatory approvals for launches, they are optimistic that they will see them in the coming quarters. With that said, I trust their commitment as they have demonstrated their proven track record of success with EpiPen as a prime example. These complex generics such as EpiPen, Frateo, and Bayetta may take longer from an approval standpoint compared to non-complex generics, but if Tevin can mirror the results they have achieved with their EpiPen, they will bring significant value to both organizations on approval. With Tevis pending product approvals, along with the work we performed on the Pfizer development program in the third quarter and in Dorsey's development program for Solatacrol, which continues to enroll their phase three trial, we believe we have a very robust alliance business that remain pillars of potential growth in the future. I'll now turn the call over to Fred for a detailed review of our financials. Fred?

Thanks, Bob, and good morning, everyone. Our ability to continue to report another strong quarter with revenue growth of 20% over 2020 for a record $48.2 million and net income of $5.4 million, or 3 cents per share, reflects the durability of our diversified business. The continued growth in both Zalstead and Tevis Generic EpiPen this quarter also contributed to our total revenue-to-date revenue increase of 28%, $235.3 million as compared to the prior year. As a result of our ongoing performance, we have updated our full year 2021 revenue guidance to $180 to $190 million, representing 20% to 27% year-over-year growth. In the third quarter, we were also able to continue to strengthen our balance sheet with cash generation, and recently we replaced our Hercules term loan with a credit facility from Wells Fargo, reducing our expected future interest expense. So let me now provide a more detailed review of the financial results for the third quarter and nine months ended September 30, 2021, which brings us to slides 11 and 12. Total revenue was $48.2 million for the three months ended September 30, 2021, a 20% increase compared to $40 million in the same period in 2020. For the nine months ended September 30, 2021, Total revenue was $135.3 million, a 28% increase from $105.5 million for the comparable period in 2020. Sales of our proprietary products, Zosted, UltraXip, and Nocturna, generated revenue of $20.8 million and $58.5 million for the three and nine months ended September 30, 2021, compared to $15.8 and $43.2 million the same periods in 2020. The 32% and 36% increase in proprietary product sales for the three and nine months ended September 30, 2021, compared to the same periods in 2020, were principally attributable to continued growth in sales as of then. Licensing and development revenue was $3.7 and $15.8 million for the three and nine months ended September 30, 2021, compared to $4.3 million and $8.8 million for the comparable periods in 2020. The decrease in licensing and development revenue in the quarter was due to fluctuations in timing of development activities, while the overall increase in 2021 was primarily the result of incremental development and product maintenance activities with TEVA and other ongoing partner development projects. Royalty revenue increased to $11.4 million for the three months ended September 30, 2021, from $6.7 million for the same period in 2020. For the nine months ended September 30, 2021, royalty revenue increased over 83% to $29.3 million, compared to $16 million for the same period in 2020. During the third quarter, the EpiPen market benefited from a normal back-to-school season and Teva achieved a 58% market share, which accounted for the net increase in royalty revenue over 2020. Our gross profit was $31.8 million and $85.9 million, representing a gross margin of 66% and 64% for the three and nine months ended September 30, 2021, as compared to $23.5 and $61.4 million, or 59% and 58% gross margin in the same periods in 2020. The increases in gross profit and margin were primarily attributable to the increases in Zosted sales and epiroyalty. Research and development expenses were $3.9 and $10.6 million for the three and nine months ended September 30th, 2021, compared to $2.4 and $7.8 million for the comparable periods of 2020. The increase in R&D costs were mainly driven by our internal development programs. As Peter discussed previously, we initiated the phase one study for ATRS 1902 for adrenal crisis rescue and we conducted preclinical work for ATRS 1901 in the third quarter. Selling general and administrative expenses were $19.9 and $55.2 million for the three and nine months ended September 3, 2021, compared to $15.2 and $46.1 million for the comparable periods in 2020. The increase in SG&A in 2021 was primarily due to the incremental costs associated with the launch of Nocturna, and an increase in sales and marketing expenses that had declined during the pandemic in 2020. As a result of our strong financial and operational results, we reported income before income taxes of $7.2 million and three cents for basic and diluted earnings per share for the third quarter of 2021. And for the nine months ended September 30th, 2021, our income before taxes was $17.2 million and earnings per basic and diluted share was eight cents compared to $4.8 million and 3 cents per share in the comparable period of 2020. As of September 30, 2021, our cash balance was $57.4 million. Finally, to conclude my update, I'd like to discuss our recent credit facility, which we entered into with Wells Fargo. During 2021, we have generated $27 million in operating cash. This cash generation has allowed us to reduce our Hercules term loan $40 million at the beginning of the year to $20 million at September 30, 2021. As a result of our improved financial condition and performance, earlier this week, we extinguished our term loan from Hercules and entered into a credit facility with Wells Fargo in which we obtained a $20 million term loan. The combination of paying down and ultimately extinguishing the Hercules term loan and replacing it with Wells Fargo debt will allow Antares to reduce our interest expense by approximately $3 million on an annual basis. The credit facility Wells Fargo also gives us access to additional borrowing capacity, providing the company with more financial flexibility. I'll now turn the call back to Bob for closing remarks. Bob?

Thanks, Fred. As we operate under a wide umbrella of diversification and opportunities, I believe our achievements year-to-date set us up for a nice finish to 2021. despite significant challenges that persisted throughout this year due to the pandemic. Our commercial organization demonstrated the growth opportunities across our proprietary portfolio with Ziosted, Nocturna, and Otrexa, driving a 32% increase in that portion of the business, while Teva's generic EpiPen drove a 70% increase in our royalty revenue. In the first nine months of 2021, we saw significant increases in our revenue, margin, net income before taxes, EPS, and cash generation. We expect the balance of the year to be as strong as the first nine months. I'm very proud of the efforts of all the Antares employees and thank them for their dedication and tireless work throughout this quarter and year, performing extremely well in a very challenging time. As we map our future growth trajectory, we believe the in-license agreement for Talando and the advancement of ATRS 1902 will further enhance our proprietary portfolio. And with a stronger balance sheet, we also expect to continue to pursue corporate development to support our strategic initiatives as we await the advancement and potential FDA approvals of our partner programs. Again, thank you for your interest. And operator, you can now open the lines up for questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off. to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a few moments to allow everyone an opportunity to signal for questions. We'll take our first question from Greg Frazier with Truist Securities.

Good morning, guys. Thanks for taking the questions. First one on diet said, curious if there were any temporary impacts on gross net in the quarter that we should keep in mind as we think about the fourth quarter.

Hi, Greg. This is Fred. I'll answer that one. Now, there was nothing unusual in the third quarter gross net that we would expect to see take place in the repeat in the fourth quarter. It was a normal quarter for us. No unusual adjustments there.

Got it. And on T-Lando, do you think that that product has the potential to achieve ZioFib-like market share? Any color on how you're thinking about share potential would be helpful.

Thanks, Greg. I'll take that question, and then I'll let Joe add anything if I miss something. I mean, look, we think T-Lando has as much potential as ZioFib, because it's a really large market with testosterone replacement. There's over 8 million prescriptions And as successful as Zyastat's been, we're still in that 4% market share. And so we still, you know, we believe there's a lot of upside for both Zyastat and bringing along Calando. We believe, you know, when Joe was talking about earlier in his talk about, you know, 20-some percent of the market are gels, we believe that product really fits perfectly well in that market. And quite honestly, we're surprised anyone really uses gels anymore because of the challenges there. you know, doing a daily application of a large volume of gel, that you have transference issues and so forth, we believe those patients that may be going to those gels initially because they think it's going to be easy or they're afraid of injections will be really perfect potential, you know, patients for Tolando. And so when we look at the overall market, we think it's as much opportunity for Tolando as for Zyastad. And, you know, when we go into the doctor's offices, it's really about giving them the choice, you know, We'll obviously provide both of the clinical data and show that both work extremely well and let them allow their patients to choose based on their preference of a once-weekly painless injection or a daily, twice-a-day oral tablet. And so we think there's a lot of opportunity, and we're really excited about it. We're growing our sales force to accommodate having two products basically side-by-side when we go into those doctor's offices. And I don't know, Joe, if you have any other comments.

Yeah, the only other color I would give, Greg, is that we're also realizing that when you look at the market, there's still a decent amount of business that's in the lower decile. So the value of us expanding our footprint enables us to go to those lower decile customers that we don't necessarily call on today. And we think there's a great opportunity there, not only for Talando, but also for Ziostan. and obviously we're going to continue to focus on our top prescribers for Ziosted. We think there's a huge upside in market share for Ziosted as well as Tolando. There's definitely space in that market for products like this, especially when you've got obviously the convenience we do with Ziosted and then now the convenience of the oral. As I mentioned in my talk at the conference that I was at, physicians were very excited to have a product that they don't have to have a complex titration schedule to deal with. They're very excited about getting a chance to provide something to patients who just don't, for whatever reason, want an injection. And as Bob said, still are using gels maybe because they're not aware that there's a convenient oral option that will be on the market.

Great. Thanks for the color. The last question is on the outlook, the revised revenue outlook. Are you guys including any contribution from partner products that are pending approval?

Yeah, so when we looked at our guidance, in the beginning of the year, the guidance was a bit wider. It was $175 to $200 million, and that anticipated, the upper end of the range anticipated the potential approval for TAO. And so when we tightened the guidance, obviously we only have a couple more months left to go in the year, so we have a real good view of what our products are doing. And when we look at our partner products, We don't assume any approvals, and it's not a negative. We just, you know, from our guidance standpoint, we just, you know, put it in there as, hey, this is what we're going to do with our current business, and that's why we tightened it up. You know, we increased the lower end and brought down the upper end a little bit, you know, kind of reflective of where we think we're going to wind up from what we currently are selling today. There's always upside that we do get an approval, but, you know, we think from a guidance standpoint, given that there's only, you know, really six weeks or eight weeks to go, We felt it was prudent to bring in that range.

Got it. Thanks very much.

We'll take our next question from Stacy Koo with Cowan & Company.

Hi, all. Congratulations on the progress, and thanks for taking my questions. We have a few. Looking at your guidance, it implies roughly $50 million in in revenue for Q4. So how should we be thinking about next year's growth? Can we talk about what are the expected puts or takes? For instance, right now, consensus revenue next year is roughly 230 million. That's the first question. And then the second question is, at this point, what is driving new starts for Stylista? Is it just switching from IM or GELS, or are you trying to broaden your clinician reach, as you've stated, with Tolando? And then my last question is on, have a partner at EpiPen. You disclosed around 60% market share last time and you're providing updates now. So how should we be thinking about the future growth of this partner product for next year or even as we think about Q4? Thank you.

Thanks, Stacey. I will take the EpiPen question first and then Joe handle the, as I said, and then we'll come back on the overall guidance question in the third. We'll cover that after those two topics. On EpiPen, they've done a fantastic job of gaining market share in a very challenging market given that the brand leader previously had a pretty long established period of time where they were the brand and everyone knew that EpiPen was the product to use. They ended up They're around anywhere from 56% to 60% any given week, and it's really a function of who's selling the product, whether it's coming through CVS or Walgreens or whatnot. But we believe that right now they're probably at the point of where it makes the most sense to be from a market share standpoint. We don't expect them to get any huge additional gains from unless there's a supply interruption of a competitor. And so far, you know, we've been able to provide TAVA with the necessary devices that they need in order to, you know, not only, you know, get that market share, but also maintain it. So as we look forward... you know, we think that, you know, if they maintain the relative market share that they have now, we'll still see growth next year because we weren't at 56% or 60% market share in the beginning of this year. And so we think there is still upside from a market share standpoint overall. There was, obviously, there was a positive impact. You know, with COVID, there were some, there were, you know, EpiPens being utilized or being at least available for the vaccines when they were, you know, when they were providing the COVID vaccine, COVID-19 vaccines in case someone had anaphylactic shock or in case they had some adverse reaction to the vaccine. We expect that to not be as robust next year, but overall, again, we still expect to see growth for EpiPen in 2022 versus 2021. Overall, I think Tev has done a great job, and we're very happy with where they are from a market share standpoint. Again, only expect to see any incremental increases if there is a supply interruption in the market. I'll turn the call over to Joe for the Zyestad question.

Stacey, thanks for the question about the new patient starts. The good news is, as I mentioned, we had our all-time highest week ever last week with Zyestad, and what we're finding is that we're still getting the benefit of switches from the IM business, which is obviously a big portion of our growth, but we are also getting the other 50% from new patients. Where we see an opportunity is we go into those lower deciles through our expansion. We think there's even more business opportunity there that can be had with Zysted. And the other thing that's a big upside as we kind of look forward is that the market kind of normalizes. We know that patient volume is has decreased over this past year, that we're beginning to see come back up towards normal. So as those new patients go into the both urologist, endocrinologist, and or primary care offices that are candidates for testosterone, there'll be great options there for new patients that are truly new to therapy as well as for both Zyacet and then for next year, also potentially some that'll be available for Talando because they might be patients that again, may or may not want an injection. So that's where, about 50-50 is kind of where the split is right now between new starts and switches.

And Stacey, this is Fred, and I appreciate your comment or your question about guidance for 2022. I think it's still too early for us to comment about where the consensus is at, and I fully expect we'll do what we've done in the past and provide our guidance the end of December or beginning of January. But what I can comment on is when we take a look at 22, we're excited at what we're seeing. With the expanded sales force that Joe mentioned a little bit earlier, we continue to expect Zalstead will be a significant growth driver for the organization going forward. And as Bob mentioned with Teva's EpiPen, again, it's been a terrific year for us this year, and we see that continuing into 2022 as well as we continue to manufacture millions of pens allowing them to reach the 58% or near 60% market share that they have. With Talando, that's going to be really the launch year, and we'll be working on getting coverage throughout the year. We hope to have the coverage up to where Zalstead is at the end of the year, but certainly it will be a challenge at the beginning of the year having the coverage and having a launch in the second quarter. We won't see a full year's worth of revenue. With our other products, Otrex, Absuma, Makina, overall, as a basket, we expect them to be relatively flat. We're not looking at significant changes in any of those products at this time. One thing that we are... thinking about when we're talking about the guidance for 2022 is not including unapproved products like we did this year. You know, with Forteo and other potential product approvals, you know, it's why we set the range as wide as we did. You know, we'll probably be looking more at just our existing products that we have and what we would expect our revenue to be. But overall, I think that the consensus guidance that's out there, we will address. But from this point right now, it doesn't seem all that far off from where we may be, positive or negative.

Really appreciate all the details. Thank you.

We'll take our next question from Damon and Selim with Piper Sandler.

Thanks. So just have a few questions. questions. First on to Lando, are you in a position to give us any color on the WAC or at least give us some sense of whether it's going to be similar to that of Zysted or maybe in a higher range? How should we think about that? And is it safe to assume that the gross to net spread will be similar to that of Zysted, particularly given your commentary regarding the payer landscape ideally being similar to that of Zysted. So that's the first set of questions. And then just a higher level question about the business. As you're building out the proprietary portfolio and you're in licensing assets, how do you think about your partner products and specifically would you look to, you know, monetize some of these royalty streams? as a way to accelerate the development and build out of your proprietary portfolio. Thanks.

Thanks, David. I'll take the first question, and again, Joe can help out if needed. But on the question on Talando and have we decided on a wholesale acquisition price or WAC, the answer is we have not yet. We still are doing a lot of market research with payers as well as with physicians to really understand the value proposition that they see, you know, with a twice-daily oral capsule. And so, you know, we don't want to, you know, make any assumptions at this point. Obviously, we use some internal numbers for our modeling and so forth. But, you know, we think clearly Tolando has a value proposition that warrants a, you know, a branded price that is, you know, in the range of, of zyestead as well as what's out there with jatenzo and we just haven't decided where we're going to wind up yet and so as we get closer to launch and we get more of that um information in in-house we'll be able to you know guide guide the street a bit better but overall we do believe there's uh you know value there in that product and would warrant a branded price type of uh John, if you want to add anything on that.

Yeah, as I mentioned, I think that we know that physicians appreciate the options, having options. So we also know that one of the things our team is, we think, uniquely talented at that maybe wasn't the same for the other oral on the market is we also can navigate the prior authorization process fairly well, especially with our partnerships in the SP. So that we also think will help the launch of Tolando be more successful than what we saw with the other oral on the market. So we think those will certainly help us as we get out the launch year and then get the access to a place where it's similar to that as I said.

With the gross to net, David, I think we would be looking at something similar. We would be doing similar programs that we have right now. you know, with our Zalastat product, whether it's the co-pay cards or looking at any other programs, we would certainly be looking at similar growths to NEPS over a period of time. First year, it's going to be unusual, right, because, you know, depending on the coverage and the rebates, it's going to be hard to judge. But over a period of time, I'd expect them to be very similar growths.

I think initially we'll be making sure that if the doctor writes it, that it gets covered. Well, not covered, but if it's not covered by insurance because we're still waiting for that coverage to come in play, then there'll be, you know, different programs that we use like we did with Zyacet, you know, first fill free and things like that. And that, you know, that way you get the prescription, you know, filled, the patient gets on the product, and, you know, obviously if they have a positive response, then they tend to stay on that product, and that's really important and valuable for us and for the product. And so... You know, where we might not have, we clearly aren't going to have the same coverage out of the gate as we do with Zyastad because it took a year to get to that 75% level for Zyastad. You know, those other things that we can do to help the patients would probably offset some of those reductions that you would normally see in the payer coverage. And so, overall, probably going to see a similar growth.

Yeah, and we didn't have, when we launched Zyastad, we didn't even have the partnerships we do today with the SPs. So that's another difference as we kind of jump into the launch of Talando. Regardless of coverage, at least we've got the SP partnerships that we anticipate will be valuable as we get patients on therapy.

And for those who don't understand some of the terminology, SPs are specialty pharmas where we go through some of the smaller specialty pharmas, and they help adjudicate the claim for the doctors and the offices, and that's been a real valuable tool for us. as we continue to get growth with Zyastat, and we'll use those same SPs who weren't in place when we first launched Zyastat for Talando. And so we see the ability for that to actually have a positive impact sooner as opposed to later.

I think there was a monetized portfolio or the royalties.

David, I think that when we look at our royalties, especially when you look at something like EPI, it's been a tremendous amount of revenue for us and a tremendous amount of value. We are generating a significant amount of cash from operations, and so I don't see the need, we don't see the need to monetize our royalties. We think it's more valuable for the organization to have that revenue growth at the top line, and we believe that Through our cash generation, through the ability if we wanted to take on additional debt to look at new business or corporate development opportunities, that's the best avenue we believe right now for us. And so, you know, we're not looking at monetizing our royalties. You know, we do continue to look at our portfolio. whether or not Otrex Up fits from a pure strategic vision standpoint. That's something we're looking at as to whether or not it makes sense to potentially divest Otrex Up. But again, that brings a nice stable amount of revenue for us, and we need to look at the pros and cons of looking at our portfolio as well. But like I said, we're generating a significant amount of cash. Our balance sheet is really strong. And we feel pretty good as far as where we are from a leverage standpoint.

That's helpful.

Thanks, Bob.

Thanks, David.

We'll take our next question from Elliot Wilber with Raymond James.

Thanks. Good morning. Good morning. First question for Bob. I may have missed this in your prepared commentary, but just wanted to get an update on the status of the Pfizer collaboration for the undisclosed asset and just current thinking on where that is and if and when, in fact, it may be disclosed.

Yeah, so, you know, we made a lot of progress in Q3 on that program with Pfizer, and that's, you know, obviously despite them spending a tremendous amount of time on the vaccines with COVID-19. And so, you know, we're looking, we're working on our, you know, filing strategy with Pfizer, you know, what's the best approach, you know, timing-wise as well as, you know, what needs to be in that NDA filing. And so we're hoping that we'll have some clarity around that, you know, or timing of that, you know, this quarter. And then, you know, as far as, you know, when it gets filed, we do believe there's a potential that it's an expedited review because of the area that it's in the rescue pen. And so hopefully at that time when we file it, obviously we believe we'll disclose what the product is and, you know, more to come on that.

Okay. Okay. Then I want to ask a couple questions of Joe, I guess specifically with respect to overall market trends. You highlighted the slow recovery, I guess, in urology office visits. I think you said 30%. I guess we'd see numbers that actually suggest it a little bit worse, so I guess that's somewhat encouraging. It does look like it's turned a corner there, but if you think about the sort of below average you know, trendline rates in terms of office visits, particularly within the urology space, how much of that is actually physician-driven versus just patient-driven? And then sort of how do you think about altering your strategy in terms of, you know, different approaches to patient activation to maybe help close that gap?

Yeah, so good question, Elliot, and you're right. I mean, the market trends for patient visits are certainly down pretty significantly, no matter, you know, kind of what data point you look at. You know, you asked a good question as it relates to what's driving it. Is it more the patient visits versus, you know, physician access, so to speak? And it really is a bit of a combination because especially when we, you know, jumped out of the gates in the first quarter of the year, we definitely still saw physician access as a challenge. As we got into Q2, it certainly started to improve. And then we got into the variant, and then we sort of started to see some physician access to get back to kind of a challenging situation. But the good news is as we kind of get into Q3, at the tail end here of Q3, we're starting to see that access go back up towards where it was in that Q2 timeframe as the variant starts to subside. And the patient volume is sort of following a similar trend. You know, in the urology space in particular, you know, it seemed like it decreased more significantly than it did in, say, the endocrinology space. But with urologists, it does seem as though as the variant sort of subsides, you're starting to see patient visits come back up. And that's one of the reasons why you asked about our strategy. It's one of the reasons why we've gone really heavy on our digital strategy. So we invested a high percentage of our marketing budget on our digital campaign for both HCPs, healthcare providers, as well as consumers, both branded and unbranded campaigns. And we think that's been a help to get patients to be aware, even if they're not necessarily going to their doctor, that there's an option available for them from a testosterone treatment standpoint, as well as with Nocturna. We've partnered with GoodRx as well to get the word out on the brand. So we think the digital strategy has really helped garner some of the growth that we've seen Even in that scenario where you've seen that patient volume kind of decrease. But so far, all things, all signs are pointing to it beginning to improve. And as I mentioned, last week we had our highest week ever. We're starting to see the virtual to in-person physician office visits go back towards where it was. in Q2. So I think to seem as though that it's getting better. I'm not sure how long it'll take to get back to where it was pre-pandemic, but certainly going in the right direction.

I think the only thing I would comment to is that, you know, with the Delta variant, it really hit a lot of our large or very, you know, robust kind of territories. You know, it hit Texas and we have a, you know, we have extremely a large amount of business in Texas. in New York, all the major metro areas. And, you know, where there were flares of Delta, we saw an impact. And, you know, we're starting to see that subside, and I think that's really key in why we're seeing the growth that we're seeing. But if you looked at our quarter-over-quarter trends from a prescription standpoint, you know, Q3 was a challenge because of those large spikes in the Delta variant, and we believe we'll start to see our growth normalize back again to where it was before that third quarter spike hit. So overall, we're feeling really good about size, and we hope that the COVID-19 issues are getting behind us. But as we've seen with Delta, you never know, and it's an unfortunate thing because access is everything. If the patients aren't going to the doctor's offices to be treated, then it's difficult for us to get those new patients on, which are really critical for us to see the type of growth that we want to see with Zyvestat.

Okay, thanks. And then a question for Fred and I guess Joe and Bob as well. Just thinking about SG&A trends, it sounds like there's going to continue to be sort of an elevated level of investment in the business, even outside of the Salesforce expansion. So I just want to get more clarity in terms of the timing of the Salesforce expansion. I assume that's going to be ahead of the launch of Talando, but I guess, you know, how are you thinking about sort of being able to offset that investment spend with sort of an immediate benefit, at least in terms of, you know, incremental Zyosted RXs. And then one last question just on Talando. and the segmentation, I guess as you drilled down on that, do you think that there's a preference differential in terms of prescribers, difference between potentially the preference for an oral product between endos and urologists? Thanks.

I'll take the first part of that, Elliot, with regards to the Salesforce expansion. We're going to have, by the end of this year, we'll have 90 sales representatives by the end of this year. And then I mentioned about a 20% increase as we go into next year. Our plan is to have those folks on board in that first quarter of next year so that we can be prepared for the launch, which will be in the second quarter. So that's where we see kind of the expansion kind of taking place for the most part. And then we'll evaluate as the year unfolds as it relates to whether or not we need additional folks are not, but that we think is going to be substantial for us to be able to do what we need to do with Talando. And you asked a good question about the segmentation because we do see an opportunity to both with our current prescribers as well as with prescribers we're not currently calling on, there's opportunities for Talando. So in our current prescribers, obviously there's, especially those ones that are high users of Zysted, they still do have some gel business as an example in their practice that we can take advantage of. They also still have some patients potentially that are preferring a non-injectable option, so in those high prescribers. The lower decile customers that we're not currently calling on today, when we've looked at the data, that seems to be where Gintenso has gotten most of its use is in those lower deciles. So by us increasing the size of our sales force to the degree that we mentioned, we're going to cover now 95% of the TRT market, and we definitely think with that we'll be able to get to those lower decile customers and be able to garner the Talando opportunity there, as well as potentially some Zysted opportunity. But definitely we see those lower deciles being a good ground for Talando, and those higher deciles are going to be a good ground for both Talando and Zysted.

And just to provide some additional color on that, Elliot, you know, we were at around 79 representatives at the end of Q2. We expect to be at 90 by the end of the year. And so we do expect to see an ROI, you know, the question that you really asked, you know, for ZEISS to end Q4 and clearly end Q1. You know, having 90 reps as opposed to 79 in the beginning of next year for all intents and purposes as we get through the hiring cycle is we think that will have a positive impact on Zyastat. And then when we add that other 20% by the end of Q1, we obviously are doing that for Talanda, but also it's going to have a significant impact on Zyastat, and we'll reap the benefits of that in Q2 through the balance of the year. We're not providing guidance yet for next year, but we expect a very significant increase in Zyastat revenue based on this Salesforce alignment statement. And that's when you'll start to, I think you'll see, you know, growth in Q4, clearly growth in Q4, more growth in Q1. And then once we get that full team up and running, you know, we expect to see the benefit of that for the balance of 2022. And again, when we provide guidance, you know, we'll probably provide some guidance as to what our expectations are for Zyestad. And I think you'll see that there's a clear benefit in increasing our are increasing the sales of our team in order to get to that 95% coverage of all the scripts that are out there.

We'll take our next question from Anthony Patron with Jefferies.

Hi, good morning. Great. Thanks for fitting us in here. Could we maybe get an update and sort of look at EpiPen trends, specifically 3Q of 21 versus 2019? It's up 13%. That just strikes us as higher than the normalized trend, obviously coming off of an easy comp last year, but again, the trend to 2019. So just maybe some thoughts on why that's elevated overall. And then as you look at the spread between Mylan and Teva, You know, it sits there at 58%. You know, where do you think Teva's share can go over time? And I'll have a couple of follow-ups. Thanks.

Sure. Thanks, Anthony. On the, you know, relative to, you know, what Teva was able to achieve and what the market actually was able to achieve, it wasn't just Teva. The market overall in Q3 of 2021, you know, was up about 13 or actually I think even higher, you know, relative to the 2019 third quarter market, you know, The third quarter for EpiPen is always the best quarter because of back to school. And I think that we saw a higher than normal back to school effect because, you know, last year, you know, it was really, you know, obviously when you look at Q3 last year, it was down significantly from the previous year. and that was because no one was going back to school. I think what happened was parents didn't need to buy two pens. There are two packs. They typically have one for school, and then they typically have one for the house or their car or whatnot. I think here we saw probably above normal growth because they all were going back to school, and they probably weren't buying the pens on a normal cycle because they were at home. They weren't going anywhere. They weren't. you know, exposed to the type of issues that they worry about, whether it's peanut butter or bees or whatnot. And so, you know, we do recognize that, you know, it was a fantastic Q3 for the overall FB market, and obviously Temu and us benefited because Temu was near 60% of that market share. And so, you know, we believe that you know, giving it, you know, hopefully the COVID, you know, goes away at some point that the normal back-to-school market will be there. I think also what helps us, too, is that, you know, you know, Teva brought in a generic into the market, and it's brought the price down. And generally, I think it makes it more affordable for people to have the availability of those pens around. And so I'm not sure what's going to happen next year from a back-to-school. It could be at the same level. just because there's more kids that have peanut allergies. There's more, you know, there's more availability of the devices with us and Tevin in the market. But overall, you know, we do believe that the market will be, continue to be very strong next year in 2022. Second part of the question.

Yeah, Bob's here.

Okay. I answered that question from a previous analyst. I think that they're anywhere between 56% and 60%. We expect that to kind of stay relatively the same going forward. The good news is that this year we kind of started the year probably in the low 40s market percent share. So we're going to see growth in 2022 versus 2021. And I think that, you know, we may see Teva take more market share if there's supply interruptions of, you know, the EpiPen from Mylan or AdrenaClick from MNIL. We just don't, you know, we can't predict that. There historically has always been a lot of supply interruptions. But, you know, we expect that if Teva can maintain that, you know, 55% to 60% market share, that it's a very good product for both of us. It will continue to grow and, you know, That's what our expectations are. If you remember, Anthony, our highest expectations were that they would get half this market, and they've already exceeded that. And so, you know, I think overall the market's not only happy about that, we're very happy, but we're also, you know, at the very, you know, I think that they have done a fantastic job, and, you know, if they can maintain that, it's great for both organizations.

Great, and a couple of follow-ups on the Lipocene agreement. First, just kind of high-level thoughts on how you think the competitive dynamic between T-Lando and Jatenzo sort of will play out with the launch and just into next year. And then secondly, you also closed on the XR, an option to develop T-Lando XR. So just sort of looking at that development pathway, you know, just expectations on what that effort looks like and timing. Thanks.

So, Anthony, so with, you know, I mentioned briefly in the talk about the SMSNA conference, which is a gathering of all the medical, not all, but a high percentage of the medical professionals that treat sexual disorder as well as hormone replacement. And, you know, we were really pleasantly surprised by their comments about their familiarity with the clinical profile of Tolando, and as they, in their view, saw that against Gintendo, and what they really stressed was this unique offering that we'll have with this no need for a complex titration schedule. Our dose is really straightforward. The other product on the market is fairly complex, and it takes a while to get a patient to to kind of a steady state. So we think that's going to be a big upside for us, as well as they had commented on how, you know, the size of the meal difference potentially of what you may need with Gintenzo versus what you'll need with Calando we see as kind of a standard meal. Either way, you'll have to take it with food. So we see those factors as being a differentiator. The other big differentiator, as I mentioned before, we've got a field force that is very knowledgeable and familiar with how the prior authorization process works in our partnership with the specialty pharmacies. That wasn't true for the other product that's in the market. We think that's also going to be a distinct advantage for us because we can help the offices navigate that which sometimes is a complex process to get patients on therapy. With those things, we think we have a good opportunity to do something very different in the market than what we saw with the other oral. And the fact is the market wants an oral. It's very clear that they want an option for patients that's not a gel, that's not an injectable. And so we're going to certainly try to position ours as being, you know, the best of the options that are available.

And we don't see this really as a head-to-head competition with Jitenzo. I mean, we see this as a, you know, an ability to, you know, go into a market that's, you know, with the Dell market that still, you know, is really large and, you know, and there's plenty of room for, you know, a number of products in this market to do really well. And so, you know, we're going to focus on what we believe are the benefits of Philando as well as the benefits of Zysted and, you know, and really, you know, leverage those relationships we have with the physicians, which I think is one of the key things that the competitor may not have had coming out of the gate. They really didn't have an established sales team. It was a new product launch. They had no relationships. Here, we have some very solid relationships with a large number of the largest TRT writers. We're going to go in there with another offering that, again, may serve a need for different patients in their practice. We see it as an opportunity really just to cast a wide net in a large market. We think that there's a lot of opportunity for all the products in the market.

Thanks.

We'll take our last question from Matt Kaplan with Landenberg Thalmann.

Hi, this is Raymond in for Matt. Congrats on the good quarter. Just two quick questions. I was wondering how we should think about Nocturna in 2022. Is it something more of steady growth, reflecting the patient education visits and And for 1901, what are the gating factors for I&D filing in 2022? Thanks.

Yeah, thank you. I appreciate the question about Nocturne. I'll take at least the first part of that, which is for 2022, you know, we're really seeing, you know, there's probably three key pieces that we know is important for Nocturne. One is having a full kind of normal sales cycle, like what you would expect on a launch brand. And we haven't yet had that yet with Nocturna. When you think about the fact that with Nocturna it was launched kind of immediately post-pandemic and still through that period of time where you saw patient volumes kind of down. So we're anticipating as we have a full year launch underneath our belt with Nocturna, that will enable us to do the two other things that is really important that I think you mentioned, which is one is physician education. I mean, we definitely think that helping physicians identify patient types is clearly an important part of the Nocturna messaging. The speaker programs that we've rolled out this past summer have been a huge asset for us to help increase that education, as well as our field force has really been able to articulate to physicians what that patient type is that they're looking for with that Nocturna patient. Between those two things, that sales cycle the ability to educate, and we also think that as we grow our footprint with regards to the salespeople that we have in the market, that would be the third thing that we think is going to be a big asset to help us with Nocturna. So one of the things we realize is the more physicians that you educate about the brand, the more patients they can identify. So by having a larger footprint in a sales force, we'll be able to call in more prescribers and be able to identify more patients. So we think that'll benefit Nocturne as well in 22.

Sure, and it's Peter. Around 1901, the data that we generated in this last quarter has been helpful in understanding some of the opportunity for the product. We're very keen to make sure that we can deliver a once-weekly treatment in this area. So the data that is emerged allows us to model further on that and then take the formulation that's going to be finally used in the clinical studies, which has some advantages over the preclinical forms that have been used to date, to have that model and then test it before we go to the R&D, which we expect to do around mid-year next year if all goes well.

Thanks for that, Adekaba.

That concludes today's question and answer session. At this time, I will turn the conference back to Tram Bui for any additional or closing remarks.

Thank you, everyone, for joining us today. Please feel free to reach out to me if you have any additional questions. Have a great day.

This concludes today's call. Thank you for your participation.

You may now disconnect.